A major survey shows money is the leading cause of anxiety for us Brits*. We asked investor and mentor Bindar Dosanjh to solve four common cash concerns
1. You’re struggling with your credit card repayments
Consider switching your credit card balance to another card via a zero per cent transfer deal. Go on-line to compare the best offers on the market. Remember if you only make the minimum payment on your card each month, it could damage your credit score as it suggests to future lenders that you’re struggling, making it less likely they’ll offer you a competitive interest rate.
If you’re paying a high APR, consider taking out a personal loan at a lower rate, which will give you a fixed monthly repayment and a set period to clear the debt, providing you with some certainty. If you really can’t afford the repayments, seek free, independent advice from your local Citizens Advice Bureau, rather than using a fee-charging debt management company.
2. You’re living beyond your means
Start paying for as much as possible in cash, as sometimes credit and debit cards don’t feel like real money, if you’re a natural spendaholic! If you revert to cash, it might make you think twice before splashing out.
Go on a ‘spending detox’ and for the next three months, don’t spend on anything apart from the absolute basics – rent, bills and food. Start taking lunch into work, entertain friends at home instead of going out to dinner and do your weekly shop on-line, so you’re less tempted to over-fill your trolley.
Remember using an unauthorised overdraft will trigger a host of extra charges, so act fast. If you think you’re about to exceed your overdraft limit, contact your bank asap as they may be willing to increase your authorised overdraft.
3. You’re about to buy a house together and your partner doesn’t know you’re in debt
Hiding a debt from a loved one is surprisingly common, but of course never a good idea. The longer you keep your ‘financial infidelity’ a secret, the harder it’ll be to come clean. When you apply for a mortgage your broker will go through both your finances with a fine toothcomb, asking you for details of all outstanding loans, credit card debts and bank statements. It’s much better to have that difficult conversation with your partner beforehand, rather than in the office of a mortgage broker.
Your partner may even be able to offer some solutions or brainstorm ways you can cut back, so you can pay off your debts before you invest in a house together.
Print off and file all your outstanding bills etc, before you have the ‘big chat’ so at least you’ll appear to be taking steps to tackle the debt issue.
4. You have no savings for the future
Ideally we should all have been saving 10 per cent of our income every month since the age of 25, but in reality few of us do. The earlier you start saving for retirement, the less you’ll need to put aside monthly to achieve your goals.
By October 2018, it’ll be compulsory for your employer to automatically enrol you into a pension scheme – and the UK’s largest employers have already started phasing this in. If you wish to opt out, you need to tell them. But if at all possible, try to stay in – if you decline a pension scheme your work contributes to, effectively you’re turning down free money!
You should also aim to have at least six months of living expenses set aside, in case of losing your job, but of course paying off debts is the first priority. See section 2 above for ways to start saving. When you’re back in the black, make your pension your next priority.